Apple's iPhone 'halo effect' lifts Mac to 16.4% sales growth

Global Mac sales have significantly outpaced the rest of the PC market, which expanded just 2.3 percent year over year — just more evidence of the iPhone halo effect, according to one analyst.

In his latest installment of the "Wolf Bytes" investor note, Needham & Co. analyst Charlie Wolf said that the significant increase in Mac sales in September came in spite of the fact that Apple has refused to enter the inexpensive netbook market that only months ago was booming. Apple made the right decision to stick with its high-end, premium segment, he said.

Calling the netbook craze "the implosion of PC prices," Wolf noted that Mac sales did slide in March of 2009 by 0.7 percent, but Apple's share continued to grow as overall PC sales fell 6.7 percent. As both PC and Mac sales turned for the positive through September, Apple has continued to widen the gap, which now sits at 14.1 percentage points.

"We have consistently argued that Mac price cuts were a misguided strategy," Wolf said. "Such cuts would not have stimulated much demand because the price elasticity of demand for the Mac — the one differentiated product in a sea of commodities — was simply too low. They would end up decimating Apple's gross margin with little to show for it."

That "pricing discipline," as he called it, has led Apple to a worldwide revenue share of about 10 percent, while its market share hovers just north of 4 percent. In the U.S., the revenue share of PC sales for Macs rests above 20 percent, while the unit share is just above 10 percent.

Wolf credits continuing Mac expansion to the popularity of the iPhone, which, much like the iPod before it, has created a "halo effect" that encourages consumers to switch to the Mac. Only this time, he said, it seems as though the iPhone is even better at pulling in new users.

"We believe that the halo effect emanating from the iPhone should be even stronger than that surrounding the iPod," he said. "After all, the iPod is a relatively simple device while the iPhone is arguably a mini-computer wrapped in a phone's form factor."

Wolf has been a proponent of the iPhone halo effect theory for some time. As the iPhone cannibalizes iPod sales, the handset is expected to fill the role once carried by the media player.

Interestingly, the 16.4 percent growth in Mac sales in September was led overseas. While Mac sales increased 9.8 percent in the U.S., they spiked 38.7 percent in Europe and 27.1 percent in Asia.

Most of the success of the Mac of late has been thanks to the home market. Apple's home sales grew 28.8 percent worldwide in September, versus only 18.1 percent for the rest of the market. Education sales, too, were strong, growing 15.6 percent, while overall PC sales sagged 2.5 percent in schools. Apple, though, lost 12.4 percent in the business market, and 76.8 percent in government sales.

Last quarter, Apple sold a record 3 million Macs along with 7.4 million iPhones, increasing the company's profit more than 46 percent to $1.67 billion. The Mac maker is expected to sell an additional 2.9 million machines this quarter.

This result can't completely be attributed to the "halo effect". I think the quality of Apple's computers and word of mouth also had something to do with it. People aren't simply buying Macs because they think their iPhones are cool. People are gradually figuring out that Macs don't "suck" as some Winboys liked to froth, and that they are, in fact, really really nice computers. Some people were also likely to have been hugely attracted by the new unibody design of the MacBooks and especially the aluminum MacBook Pros.

Call it whatever you like - "halo effect" is nice, why not, one thing is for certain: Apple knows the market far better than any other player. They know how to create desire and excitement and make money at the same time. A rare feat in these times. Even more interesting, is that they now dominate the most profitable and most coveted segment of the market. Apple does indeed care about market share, but only in the most profitable segment.

The generic box makers, much to their misfortune, have absolutely no way of differentiating themselves - Sony is HP is Lenovo is Acer. And MS has no problem with whoring out their back-asswards copy of OS X to even the lousiest box-maker. Abusive codependent relationship indeed.

I have always thought the halo effect of the iPhone was a two edged sword unlike the iPod for precisely the reason the analyst states "the iPod is such a simple device and iPhone is a minicomputer". You need a iMac or Macbook to do much more with an iPod. The iPhone can almost stand alone. I had already switched to a mac before buying an iPhone and recently purchased a nice Macbook Pro, but unless the trip absolutely requires it, I find myself leaving the laptop at home and at times wondering if I really should have purchased it. It will certainly slow my need for a new notebook as long as I keep getting a new iPhone every 2 years or so.

This result can't completely be attributed to the "halo effect". I think the quality of Apple's computers and word of mouth also had something to do with it. People aren't simply buying Macs because they think their iPhones are cool. People are gradually figuring out that Macs don't "suck" as some Winboys liked to froth, and that they are, in fact, really really nice computers. Some people were also likely to have been hugely attracted by the new unibody design of the MacBooks and especially the aluminum MacBook Pros.

I agree and my 2 cents .... There isn't a day goes by I don't meet someone saying they are getting a Mac next or have just got one. Many say a friend or a relative has recently go one and love it so they are going to get one now. This is based on the Mac experience and subsequent enthusiastic recommendations not the iPhone Halo effect although I agree that is probably what started the ball rolling in the first place. The constant refrain I hear is "Oh why did I wait so long?" from recent switchers.

Most of the success of the Mac of late has been thanks to the home market. Apple's home sales grew 28.8 percent worldwide in September, versus only 18.1 percent for the rest of the market. Education sales, too, were strong, growing 15.6 percent, while overall PC sales sagged 2.5 percent in schools. Apple, though, lost 12.4 percent in the business market, and 76.8 percent in government sales.

Apple's stratagem of only targeting the rich niche consumer is seriously flawed.

Sure they are making a profit, I can make a profit selling lemonade in front of my house, but it's not going to "change the world" for the better and vulnerable to changes in the larger market.

For instance any crap change on the PC side is reflected on the Mac side, because Apple can't compete unless it uses commodity PC parts.

The economy is going to deal Apple a serious blow in the consumer market for the next several years and with virtually no footprint in other markets to compensate, we are looking a implosion here if Steve passes away.

Apple is going to wish it hedged itself and paid more attention to business and government sales, which can sign off on hundreds of thousands of computers with a single pen stroke.

Do you really think these businesses and governments want the headaches and billions of dollars of data loss using Windows?

Call it whatever you like - "halo effect" is nice, why not, one thing is for certain: Apple knows the market far better than any other player. They know how to create desire and excitement and make money at the same time. A rare feat in these times. Even more interesting, is that they now dominate the most profitable and most coveted segment of the market. Apple does indeed care about market share, but only in the most profitable segment.

The generic box makers, much to their misfortune, have absolutely no way of differentiating themselves - Sony is HP is Lenovo is Acer. And MS has no problem with whoring out their back-asswards copy of OS X to even the lousiest box-maker. Abusive codependent relationship indeed.

'Halo effect' is a nice way of saying 'blood-bath.' This is how some of Apple's competitors view it!

I have always thought the halo effect of the iPhone was a two edged sword unlike the iPod for precisely the reason the analyst states "the iPod is such a simple device and iPhone is a minicomputer". You need a iMac or Macbook to do much more with an iPod. The iPhone can almost stand alone. I had already switched to a mac before buying an iPhone and recently purchased a nice Macbook Pro, but unless the trip absolutely requires it, I find myself leaving the laptop at home and at times wondering if I really should have purchased it. It will certainly slow my need for a new notebook as long as I keep getting a new iPhone every 2 years or so.

I'm in the same boat, Mark. I gave my MB to my daughter to go to school with the idea that I would be replacing it with an MBA.

But having just replaced my original iPhone with a new 3Gs, I've sort of put off buying the MBA and rely on my 3Gs when I'm out and about and my iMac's big screen when I'm home. What I really would like now is the new 27" iMac. Decisions, decisions. Apple by making it easy, sure makes it hard sometimes!

The economy is going to deal Apple a serious blow in the consumer market for the next several years and with virtually no footprint in other markets to compensate, we are looking a implosion here if Steve passes away.